Opinion
08-11-1891
GUTCH v. FOSDICK et al.
Charles L. Carrick, for complainant. C. B. Harvey and Gilbert Collins, for defendants.
(Syllabus by the Court.)
On demurrer to bill.
Charles L. Carrick, for complainant.
C. B. Harvey and Gilbert Collins, for defendants.
MCGILL, Ch. The bill alleges that between the years 1872 and 1877 the complainant, from time to time, deposited with Jacob Erwin several sums of money, "in trust, to use or in vest the same for her use and benefit, and subject to her order and control." That in July, 1877, the money so deposited amounted to $4,000, and then Erwin gave her a certificate or declaration, of which the following is a copy: "New York, July 3, 1877. I hereby certify that I hold in trust for Frances E. A. Gutch the sum of four thousand dollars, for which I agree to pay interest at five per cent. per annum, and I promise to refund to her the said four thousand dollars on demand. J. Erwin. $4,000." That no part of the principal or interest has ever been paid. That Jacob Erwin used the moneys so deposited with him in the betterment of his estate. That he died in-testat3 in November, 1889, possessed of real and personal property of large value, leaving the defendants as his heirs at law and next of kin, one of whom, Lizzie Fosdick, has been duly appointed administratrix of his estate; and that the complainant has lately demanded the amount of her deposit, with interest, from the administratrix, and has been refused payment. It prays that by decree it may be determined that Jacob Erwin held the $4,000 in trust; that his estate is charged therewith; and that his heirs at law and administratrix shall pay it, with interest, out of his estate. To this bill the defendant Lizzie Fosdick and her husband demur, assigning three grounds for their demurrer: First, want of equity; second, that the complainant has a remedy at law; and, third, that recovery of the amount claimed is barred by the statute of limitations. Upon this hearing the allegations of the bill are to be taken as true. Here were a series of deposits with Jacob Erwin, in trust, upon an express understanding and agreement that they were to be kept and used for the complainant's benefit. The use to which Mr. Erwin actually put them was the improvement of his own property. Such was not an investment productive of a distinguishable income to the trust fund, because the value of that fund was intermingled with the value of Mr. Erwin's own property. Under the circumstances, he probably, upon an accounting, would be required to pay legal interest. It was under this condition of affairs that the certificate of July 3, 1877, was given and accepted. By it the trust was distinctly declared, a rate of interest was agreed upon, and the means of determining the trust were provided. I fail to perceive how the existence of a trust can be seriously questioned. The allegations in the bill expressly charge it, and the certificate most plainly declares it in terms sufficiently certain to be completely executed.
There can be no question as to the jurisdiction of this court in the enforcement of this trust. It may be that it may also be enforced at law, (1 Story, Eq. Jur. § 58;) but the fact of the existence of such concurrent remedy does not oust the complainant of her right to proceed in equity, (Kane v. Bloodgood, 7 Johns. Ch. 90.)
The third ground of demurrer was principally relied upon at the argument. It was insisted for the demurrants that the declaration or certificate by Mr. Erwinmust be treated as, in effect, a mere promissory note, payable on demand, which might have been sued upon at law; that in a suit at law the statute of limitations might have been interposed as a bar to recovery, because it is settled in this state and elsewhere that a note payable on demand may be sued upon at its date without previous actual demand, and hence the right of action accrued at the date of the certificate, (Larason v. Lambert, 12 N. J. Law, 247;) and that, under such circumstances, a court of equity will follow the law, apply the statute, and refuse the decree asked for. If I assume the status of the declaration of trust to be as the demurrants insist, I must acquiesce in their conclusion. In the case of Kane v. Bloodgood, supra, Chancellor Kent said: "I cannot assent to the proposition that all cases of direct and express trust arising between trustee and cestui que trust are to be withdrawn from the operation of the statute of limitation, notwithstanding a clear and certain remedy exists at law. The word trust' is often used in a very broad and comprehensive sense. Every deposit is a direct trust. Every person who receives money to be paid to another, or to be applied to a particular purpose, to which he does not apply it, is a trustee, and may be sued either at law for money had and received, or in equity, as a trustee for a breach of trust." From the examination of a large number of decisions the chancellor deduces this rule: "That the trusts intended by the courts of equity not to be reached or affected by the statute of limitations are those technical and continuing trusts which are not at all cognizable at law, but fall within the proper, peculiar, and exclusive jurisdiction of this court." This rule has been repeatedly adopted and approved in this state. Marsh's Ex'rs v. Oliver's Ex'rs, 14 N.J. Eq.262; McClane v. Shepherd, 21 N. J. Eq. 76; Partridge v. Wells. 30 N. J. Eq. 176, affirmed on appeal, 31 N.J. Eq. 362; Buckingham v. Ludlum, 37 N. J. Eq. 145; Kirkpatrick v. McElroy, 41 N. J. Eq. 539, 7 Atl. Rep. 647. In the case of Partridge v. Wells, Vice-Chancellor Van Fleet, after stating the rule, says: "The test, then, obviously prescribed by the rule is, had the suitor a remedy at law which he has lost? If the complainant in this case had a complete remedy at la w, which has been lost by lapse of time, he is not entitled to the remedy he seeks here." Under the assumption that the certificate or declaration of trust is in effect a mere promissory note, payable, with interest, on demand, the case comes clearly within the test just quoted. But is this certificate or declaration to be regarded as virtually a promissory note? It is to be observed that by it Jacob Erwin declares that he holds $4,000 in trust, not that he owes that sum, and that he will refund it, not pay it. The language is evidently selected with care, to fully and consistently express a deposit in trust in contradistinction from a promised payment of a loan or indebtedness. The declarant does not owe, he holds in trust. Considered independently of the words "in trust," the word "bold" implies a defensive possession, entirely consistent with that of a trustee. The declarant is to pay interest while he thus holds, but he is not to pay the principal sum; that he is to refund. The word "pay," importing indebtedness, is applied only to the interest which springs from the use of the fund. When disposition of the fund itself is mentioned, the word "refund" is used in the sense of "restore." I fail to perceive how more apt words could be selected to express the idea of a puredeposit intrust; and besides, it is a continuing trust, for it contemplates a holding which will justify payment for the use of the fund. The certificate, then, does not stand upon the footing of a promissory note, which treats of the payment of an indebtedness, but upon the footing of a deposit in continuing trust until the cestui que trust shall, by her act in demanding payment, determine the trust. Considerable contrariety of opinion exists in the courts of the several states as to whether a certificate of deposit, payable on demand, can be sued upon before demand has actually been made. I think that the better opinion is that it cannot be sued upon before demand. I do not find any adjudication in this state upon this subject, and I regret that my time has not permitted me to as exhaustively examine the decisions of our sister states as I could wish. That which I consider the better opinion prevails in New York, (Payne v. Gardiner, 29 N. Y. 146; Pardee v. Fish, 60 N. Y. 265; Howell v. Adams, 68 N. Y. 314; Boughton v. Flint, 74 N. Y. 476; Munger v. Bank, 85 N. Y. 580; Smiley v. Fry, 100 N. Y. 262, 3 N. E. Rep. 186,) and in Pennsylvania, (Trickett, Lim. § 224;) Maryland, (Savings Inst. v. Weedon, 18 Md.320;) Vermont, (Bellows Falls Bank v. Rutland Co. Bank, 40 Vt. 377;) Minnesota, (Mitchell v. Easton, 37 Minn. 335, 33 N. W. Rep. 910,) and perhaps other states. Most respectable authority, however, holds the other way. Curran v. Witter, 68 Wis. 16, 31 N. W. Rep. 705; Brummagim v. Tallant, 29 Cal. 503; Poorman v. Mills, 35 Cal. 118; Tripp v. Curtenius, 36 Mich. 496; Kilgore v. Bulkley, 14 Conn. 362. In recognizing the first cited of these authorities as holding the better opinion, I agree with Chief Justice Bronson in his remark in Downes v. Bank, 6 Hill, 297, where he says: "I do not find that the point has ever been decided; but it may be that this is the first case where a man has sued his banker without first drawing on him for the money. We are reminded that, where the promise is to pay on demand, the bringing of the action is a sufficient request. If that were a new question, I think the courts should not again fall into the absurdity of admitting that there must be a demand, and still holding that a suit may be commenced without any prior request. They would either say that no demand was necessary, or else that it was a condition precedent to the right of action. It is an anomaly in the law that the breach of the defendant's contract should be made out by the very fact of suing him upon it. In all other cases there must be a breach before suit brought. The rule ought not to be extended to cases which do not fall preciselywithin it "By the allegations of the bill in this case it distinctly appears that actual demand for the restoration of the $4,000 was first made within six years previous to the commencement of this suit. If the money had been sued for at law the suit would not have been barred by the statute of limitations; hence that statute will not be applied here. It is further insisted for the demurrants that, if the complainant's recovery is not barred by the statute of limitations, this court will nevertheless deny her relief because of her unexplained laches in making demand and instituting her suit. 1 am not willing to adopt this course at this time. Here is an express continuing trust, presumably acquiesced in by both trustee and cestui que trust, until the trustee died. The trust was apparently intended to be of indefinite duration for the benefit of the cestui que trust. How can it be said that she was guilty of laches in not determining it? 1 do not think that the bill exhibits laches upon her part. But upon this insistment the demurrer itself is defective, for it fails to point out that the bill is objected to for the reason that it shows the complainant to have been guilty of laches. Van Houten v. Van Winkle, 46 N. J. Eq. 380, 20 Atl. Rep. 34. The demurrer will be overruled.